Nestled at the southern end of Manly on Sydney’s Northern Beaches is a small patch of houses known locally by the beach they look out over — Fairy Bower.
This area of prime real estate is stacked with waterside mansions and, given the headland it sits on, glorious ocean views.
It’s also mostly owned by the Catholic Church.
Instead of freehold title, the church leases out its land based on the improved value of the properties — for example, in 2020 an 80-year lease was sold for $8.8 million.
So, how did the church end up with this land? And how do the leases work?
Churches gifted land
The first plans for British settlement in Manly started in the 1820s, after the land was taken from the local Gayemagal people whose numbers were decimated by a smallpox outbreak at the end of the 18th century.
Around 1850, the NSW Legislative Council decided that the archbishops of the Catholic Church should be given land to build housing for their bishops.
It opted for sixty acres on North Head in Manly.
The Anglican Church had already been granted a swathe of dispossessed land at the end of the 18th century in what is now Glebe, in the city’s inner west, originally home to the Gadigal people.
While the Anglicans ultimately handed their land, which they had also leased out, back to the state government in the 1970s, the Catholic Church held onto its.
After building the castle-like St Patrick’s Seminary, which is now part of St Patrick’s Estate, on the top of the headland, the church subdivided and leased “approximately 21 acres running down to and overlooking Shelly Beach and Fairy Bower“.
In its 2013 environmental management plan, the estate said “most of the land to the east and north” of the Seminary had been sold on a “long leasehold basis”, and a map seen by the ABC shows the church still owns the swathe of land on Bower Street east of Bower Lane and along Montpelier Place.
The ABC contacted Catholic, Anglican and Uniting Churches in every state and territory asking if similar leases exist elsewhere.
The leasehold arrangement in Manly is unique.
In some instances, churches or parishes that own houses for priests or vicars to live in will rent them out if they’re vacant, for example, if the priest or vicar lives locally and doesn’t want to move.
In those situations, representatives from the Catholic, Uniting and Anglican churches said they are rented for market price, with the profits going back to the local church.
How do the leases work?
Jake Rowe, a real estate agent who lives locally and has sold tens of leases in the area, said the church now offers people the chance to extend their lease every five years for a minimum of 20 years and to a maximum of 99 years.
The cost of renewal or extension is one per cent of the improved value of the property for every year they want to extend. For example, if your property is valued by the church at $15 million and you want to extend it for 50 years, it’ll cost you 50 per cent of the value, or $7.5 million.
Leaseholders can sell their leases to someone else at any time, but the buyer has to be prepared to pay the asking price and the cost of renewing the lease whenever it expires.
Given the exponential growth in property values in the area, the cost of renewing a lease is now well into the millions.
For local couple Barrie and Ikuyo, their 80-year lease in 2020 cost $8.8 million.
They told ABC iview’s Restoration Australia they had looked at 200 to 300 houses in and around Manly before nabbing the leasehold site.
They bought a large corner block with a dilapidated Californian bungalow on it, which they have since restored.
If a lease isn’t sold or renewed, it returns to the Catholic Church which inherits the value of the property, including any upgrades or renovations to the house on the site.
Church part of housing alliance
The Catholic Church is a member of the Faith Housing Alliance — a collection of faith groups working together to prevent homelessness.
Former NSW Liberal minister Rob Stokes is the chair of the Alliance and said members were looking at how they could use their land and incomes to “meet a common goal of housing justice”.
“All of our doctrinal, theological positions start on the basis that if we’ve got wealth, it’s our obligation to share it,” he said.
“We’re looking at any land owned by our members … it could also be future land acquisitions, and acquiring stakes in affordable housing projects, for example.”
Mr Stokes said the Alliance’s thinking wasn’t about “can we flog this for the highest price possible?”, but instead looking at how resources can be used to meet the broader need.
“We’ve got these resources, sometimes they have things like … land tax discounts,” he said.
“In some cases, the land was given by governments past so there’s a broader obligation to use it for community good.”
The Alliance’s focus is on places of worship, which are often in convenient locations and near public transport.
“We’ve done an audit just in New South Wales … there about 2,200 places of worship, of which 747 are within 800 meters of a railway station,” Mr Stokes said.
“These are land holdings that are often, for historical reasons, bought in really convenient spots.
“People who would otherwise qualify for social or affordable housing would have no hope in hell of being able to live anywhere near these places.
“But these places have access to jobs and education, social services, so the churches and other religious bodies are uniquely positioned to make a difference in those people’s lives.”
Federal views of leases mixed
Housing spokesperson for the federal Greens, Max Chandler-Mather said the church was acting as a “for-profit developer”.
“The church receives tax exemption status on the basis that they are a charitable organisation, yet here we have an example of the church behaving like any other for-profit developer, making money off surging land and property prices,” he said.
The Shadow Housing Minister, Michael Sukkar, said given the “extensive charitable work on both a national and international scale”, he had no concerns about the residential leases.
“We are very supportive of these arrangements and are confident that the money is being used for important mission work and charitable housing services around the country, as well as to overall support the good work of the Catholic Church,” he said.
Federal Housing Minister, Julie Collins, declined to comment.
Stream the new season of Restoration Australia on ABC iview.